Wednesday, August 31, 2005

Most Italians are incredibly complacent (and totally ignorant) about the economy. I find this rather worrying considering the lamentable state it is in. Here is a lucid overview:

Over the years, the Italian economy, sliding further into stagnation, has grown accustomed to bleak reports. Recently the national association of industrial enterprises, Confindustria, issued a damming forecast for one of the most dynamic exporting regions of Italy, Friuli-Venezia-Giulia. It showed that 63 percent of enterprise managers in the region were expecting stagnant demand and 70 percent saw no potential for increases in employment over the next 12 months. Overall, Italian production has been in a decline over the last year, with industrial output shrinking by 2.3 percent in annual terms between June 2004 and June 2005. With such a gloomy mood taking hold of the more productive parts of Italy, how bad are the expectations in the forever-sick regions of the Southern Mezzogiorno?Yet leafing through the Italian press, one gets a feeling that all of the country problems are either due to some external factors or the cause of insufficient fiscal spending. If only by a miracle, the US, Germany and France were to grow at a faster pace… or the Euro were to be replaced by the Lira… or the evils of globalization were to vanish by a wave of a magic wand… or the Left-Centre coalition were to come back into power and spend its way out of the recession… the jobs and the demand for Italian goods will mushroom. Playing ostrich - a favorite pastime for many Europeans - is becoming a rival sport to Italian soccer.Despite an affinity for denial, the ailments afflicting the Italian economy are Italian-made. From a regional development perspective, two major problems plague Italy: fiscal recklessness of government and the structure of ownership in the economy.

It is too bad that it has to be this way, but evidently things need to get a whole lot worse before they can get better; maybe then Italy will find the energy for reform.

Tuesday, August 30, 2005

This week the Economist's cover story talks about the "olioholics," America and China.

It is easy to point a finger at China's growing oil demand (which has in fact cooled off this year), but America remains the biggest consumer, using one-quarter of the world's output of the black stuff. America uses 50% more oil per dollar of GDP than the European Union, largely because consumers pay less. As petrol prices have hit $3 a gallon in some cities, there has been an outcry from motorists. Even so, petrol remains dirt cheap in America, compared with Britain or Germany where prices are above $6 a gallon. America's heavy dependence on oil not only leaves the economy more vulnerable to a supply shock, it also pushes prices higher for the rest of the world.The best long-term solution—for America as well as the world economy—would be higher petrol taxes in the United States. Alas, there is little prospect of that happening. America, unlike Europe, has preferred fuel-economy regulations to petrol taxes. But even with those it has failed abysmally. These regulations have been so abused that the oil efficiency of its vehicles has fallen to a 20-year low. This week, the Bush administration announced proposals for changing the fuel-economy rules governing trucks and sport-utility vehicles, but failed to close loopholes that allow these gas guzzlers to use more petrol than normal cars, a shameful concession to carmakers.America and China, in their different ways, are drunk on oil consumption. The longer they put off taking the steps needed to curb their habit, the worse the headache will be. George Bush once learned that lesson about alcohol. It is time for him to wean America off oiloholism too.

There is a good reason why tighter fuel efficiency standards don't lower gas consumption. Here is an explanation:

"The pursuit of efficiency," write Peter Huber and Mark Mills in "The Bottomless Well," their superb book on the future of energy, "has been the one completely consistent and bipartisan cornerstone of national energy policy since 1970."We're told that higher mpg can even defeat our enemies. In a recent article that linked oil dependency with terrorism, Fareed Zakaria, editor of Newsweek International, concluded, "It's true that there is no silver bullet that will entirely solve America's energy problem, but there is one that goes a long way: more fuel-efficient cars. If American cars averaged 40 miles per gallon, we would soon reduce consumption by 2 million to 3 million barrels of oil a day."Increases in energy efficiency have been the rule in the United States for a century -- and especially in the past 30 years. But, as Huber and Mills write, "Efficiency doesn't lower demand, it raises it…. Efficiency has come, and demand has risen apace."

In this graph, the authors show how the "energy cost" of transportation in the U.S. fell by nearly one-third between 1973 and 2003; that is, we used to use nine gallons of fuel for every vehicle mile, now about six. But over this same period, total fuel use did not drop by one-third (as it would under the silly static analysis employed by Mineta and Zakaria); instead, fuel use rose by more than half, from a little under 120 billion gallons per year to over 180 billion gallons.This result is predictable in the world of economics. Only in the world of politics can it be ignored, or distorted.When something works better or more efficiently, it is, by definition, cheaper, so we want more of it. Demand for computers rose sharply, for example, as faster microchips and better software increased the machines' ability to do more.

The conclusion, it seems to me, would be that to lower oil consumption it would be necessary for the United States to raise taxes on gas. I am not sure whether this is a good idea, and it will surely not happen in the near future, though I must admit that the Economist makes a good point.

Monday, August 29, 2005

Wolfgang Munchau, one of my favourite columnists at the Financial Times, addresses something I have been wondering about: Why haven't the other central bankers and members of the Eurozone called for Fazio's resignation? He has irrevocably damaged the reputation of the Italian central bank, but doesn't this affect the ECB too?

But this is not an entirely Italian affair. It has implications for the eurozone at large. Most economists and central bankers would agree that integrated financial markets are a prerequisite for a single currency to function properly. The reason is that money needs to flow through the system as efficiently as possible. The European Union is still struggling to create a fully fledged single market for banking and financial services. If Mr Fazio, who is also a governor of the ECB, has protected domestic banks against foreign takeovers, he has acted to the detriment of the eurozone, in breach of his responsibilities.[...]As life-long governor of the Bank of Italy, Mr Fazio is by extension also a life member of the governing council of the ECB, which sets interest rates for the eurozone. As the Bank of Italy is a participant of the European System of Central Banks and a shareholder in the ECB, it follows that Italy’s commercial banks are indirectly also the shareholders of the ECB.This is a problem that affects the rest of the eurozone much more directly than would appear at first sight. It constitutes a serious malfunctioning of Europe’s central banking system. This should be of great concern to the ECB. It is possible ECB officials are holding behind the scenes talks with the Bank of Italy. But the ECB’s public silence on this affair is deafening.Mr Fazio’s loyal supporters have tried to deflect attention by insisting that the real scandal was the invasion of privacy Mr Fazio and other bankers suffered. This is nonsense. These published transcripts have greatly served the public interest because they have given us a unique insight into the close-knit world of banking regulation in Italy.There is an unspoken rule among central bankers that you never criticise one of your own. Recently, I was listening to a discussion panel chaired by a former central banker and including a current central banker. The former central banker said to the current central banker: "No matter what you are going to say, I shall agree with you."This is the spirit of central banking, and I suspect it is also the reason for the silence from Frankfurt.

It is true that the European institutions cannot save Italy from itself, but at least giving signs of displeasure would push things along a bit (I would hope). But, as usual, I'm not counting on it.

A War to Be Proud Of - The case for overthrowing Saddam was unimpeachable. Why, then, is the administration tongue-tied?

Let me begin with a simple sentence that, even as I write it, appears less than Swiftian in the modesty of its proposal: "Prison conditions at Abu Ghraib have improved markedly and dramatically since the arrival of Coalition troops in Baghdad."I could undertake to defend that statement against any member of Human Rights Watch or Amnesty International, and I know in advance that none of them could challenge it, let alone negate it. Before March 2003, Abu Ghraib was an abattoir, a torture chamber, and a concentration camp. Now, and not without reason, it is an international byword for Yankee imperialism and sadism. Yet the improvement is still, unarguably, the difference between night and day. How is it possible that the advocates of a post-Saddam Iraq have been placed on the defensive in this manner? And where should one begin?

He goes on to forcefully make the case for the war in Iraq, and in the process skewers the Bush administration for not doing so itself. The result is a masterpiece: absolutely do read the whole thing.

Saturday, August 27, 2005

A good friend of mine e-mailed me this article by JohnDean, a lawyer who was famously implicated in the Watergate scandal. The title says it all:

Was Pat Robertson's Call For Assassination Of A Foreign Leader A Crime?Had He Been a Democrat, He'd Probably Be Hiring A Criminal Attorney

As has been widely noted in the Bush-supporting blogosphere (see here, here and here) Pat Robertson is an annoying idiot, who regularly makes dumb remarks. But then again, so is John Dean (and Hugo Chavez). The whole article is a ridiculous attempt to claim that Robertson's statement was an actual threat and that therefore he should be prosecuted under the applicable legislation.

The text of this misdemeanor statute plainly applies: No one can doubt that Robertson "attempted" to threaten President Chavez.[...]First, Robertson said he wanted to assassinate President Chavez. His threat to "take him out," especially when combined with the explanation that this would be cheaper than war, was clearly a threat to kill.[...]Robertson has Christian soldiers everywhere. Who knows what some misguided missionary might do?

I don't think Robertson was threatening Chavez, and he certainly did not say he wanted to assasinate him - his implication clearly was that the US government should do so. And when is the last time you heard of one of Robertson's "Chrisitian soldiers" assasinating, or even hurting anyone? Did John Dean get all upset when this happened? Or this?At any rate, Robertson has apologised, the Bush administration has clearly distanced itself from the comments and so have various evangelical Christian organizations. Also see Alenda Lux who argues that Robertson is less influential than people think.

Different River links to an account of last week's heart-breaking stabbing of a British yeshiva student in Jerusalem. See here for the whole story. Avinu Malkeinu, nekom le'einenu nikmas dam avadeicha hashafuch.

The Israeli military is crafting defensible borders, not unlike the old Roman decision to stay on its own side of the Rhine and Danube Rivers. In Sharon's thinking, it no longer made any sense to periodically send thousands of soldiers into Gaza to protect fewer than 10,000 Israeli civilians abroad, when a demographic time bomb of too few Jews was ticking inside Israel proper.But Gaza itself is only a tessera in a far larger strategic mosaic. The Israelis also press on with the border fence that will in large part end suicide bombings. The barrier will grant the Palestinians what they clamor for, but perhaps also fear: their own isolated state that they must now govern or let the world watch devolve into something like the Afghanistan of the Taliban.Once Israel is out of Gaza and has fenced off slivers of the West Bank near Jerusalem deemed vital for its security, Sharon can bide his time until a responsible Palestinian government emerges as a serious interlocutor.[...]From their creepy rhetoric so far, Palestinian militias have proclaimed that Gaza is the first step toward the eventual destruction of Israel proper. But once again that only plays into Israel's complaint that withdrawal is seen by Palestinians as something to be manipulated rather than as an opportunity upon which to build a just society.While there probably won't be a single Jew in the new Palestinian nation, there are more than 1 million Arabs inside Israel. Even more bizarrely, more than 100,000 illegal immigrants have left Arab lands to reside in the "Zionist entity." Politically correct Arabs will not even employ the word "Israel" in their lexicon, but tens of thousands of Arabs seem to want into it nonetheless.In a reciprocal world, why couldn't the Jewish settlers stay on in Gaza as resident immigrants, adjudicating their property claims with the new government and freely abiding by Palestinian law and protocol? Sharon is reminding us that, unlike the Arabs inside Israel, they would be ethnically cleansed in hours in the same manner that nearly a million Jews were run out of Baghdad, Cairo, Damascus and Tripoli in the decades following 1947.The pullout from Gaza is bringing long-needed moral clarity to a fuzzy crisis. Heretofore the Palestinians have counted on foreign support through fear of terrorism, influence with oil producers, unspoken anti-Semitism and carefully crafted victim status accorded savvy anti-Western zealots. But now they are increasingly on their own, and what transpires may soon end their romance of the perpetually oppressed.

Do read the whole thing. I am pleased to find that my relatively optimistic view is shared by such an eminent historian and commentator.

Thursday, August 25, 2005

Here is a hilarious post (via Instapundit) about the incredible intellectual dishonesty behind the recent claims that the draft Iraqi constitution is going to transform Iraq into a radical, Iran-like Islamist state. The real question is, do these people realize how dishonest they are being or are they totally blinded by their biases?

American inventiveness has always impressed me. Here is an excellent example of what I mean:

On a sweltering morning in early August, a couple of dozen teenagers fresh out of eighth grade are lining up outside a classroom to learn from a nun how to give a firm handshake. The reason: These teens, mostly born to Hispanic immigrants, want a shot at success. And corporate America is ready to give it to them, helping to reduce the cost of a Catholic-school education from the Sisters of Notre Dame to just $2,200 per year. In exchange, the students agree to work in a real business setting one day per week.[...]Here's how it works: Participating companies divide one full-time, entry-level position among four students who take turns doing the work, which typically includes filing, copying, or answering phones. They pay market rates for entry-level work, but students never see the money. Instead, the school gets a check, puts it toward operating expenses, and thereby keeps tuition well below the $5,000 to $9,000 tuition charged by Boston-area Catholic schools.

Clearly academic standards and curriculums have to be carefully monitored to ensure that the interests of the sponsoring companies do not get in the way, but offering these opportunities to under-privileged students, while at the same time teaching them a sense of responsibility and the skills needed to be successful in life at such an early stage seems like an excellent idea. Additionally the sponsoring companies are saving on personnel costs, therefore avoiding the unpleasant feeling that one is being offered handouts: these students can honestly feel that their contribution counts, making it easier to replicate the program.

Two of the economists I mentioned here, joined by Guido Tabellini, have made another, more detailed case for reforming the Italian Central Bank, which appeared prominently on the first page (pdf) of today's European edition of the Financial Times:

The Bank of Italy's ownership structure is coming under increasing criticism as the centre-right Italian government considers ways to reform financial market regulation in the wake of the Fazio affair.Three prominent economists on Wednesday urged far-reaching changes at the central bank so that it would not be majority-owned by the private sector banks that it regulates. Their recommendations come ahead of a meeting of a government financial committee on Friday at which Antonio Fazio, the central bank governor, is expected to defend his actions in the foreign takeover bids for Italian banks.The central bank governor became embroiled in controversy last month when phone-tap transcripts - revealing a close relationship between Mr Fazio and the head of Banca Popolare Italiana - were leaked to the Italian media. Critics claimed the transcripts showed Mr Fazio favouring BPI's bid for Italian lender Banca Antonveneta over that of ABN AMRO, the Dutch bank.[...]The economists, who published their recommendation in Il Sole 24 Ore, Italy's business newspaper, were Alberto Alesina of Harvard University, Guido Tabellini of Milan's Bocconi University, and Luigi Zingales of the University of Chicago.They said the real lesson from the takeover battles was that reform at the Bank of Italy needed to be more far-reaching."All regulatory authorities risk being captured and managed in the interests of those who are regulated. The risk is still greater for an organism, such as the Bank of Italy, which today is owned by those it regulates - the banks," the economists said.They support an argument raised at the weekend by Mario Monti, Italy's former European Union commissioner for competition and the internal market.Mr Monti said the Bank of Italy needed four reforms: a change in the ownership structure, more collegial management, a fixed term of office for the governor, and changes in the regulatory responsibilities of the Bank of Italy, the stock market watchdog and the antitrust authority.

The original article, in Italian, can be found here. While their arguments are very persuasive these economists have a very international and pragmatic perspective (they have spent significant time outside of Italy), while any actual changes will have to be wrought by the people in Italy's political class, which is incredibly provincial and narrow-minded (unsurprisingly, as this at least partially mirrors the general population). As a result I am not at all sanguine about any satisfactory outcome to result from this scandal. At this point I wonder: what does the central bank governor need to do to be forced to resign, shoot someone?

Wednesday, August 24, 2005

I wonder if environmentalists will give President Bush credit for this excellent development:

The marshlands of Iraq, which were drained during the early 1990s, are returning to their original state.Under Saddam Hussein, the area of marsh was reduced to a tenth of its former size, as the government punished people living there for acts of rebellion.The latest United Nations data shows that nearly 40% of the area has been restored to its original condition.Drinking water and sanitation projects are under way, but the UN says that a full recovery will take many years.

These are satellite images of Iraq's marshland in May 2003 (left) and March 2005 (right) - the dark areas are flooded.

I wouldn't hold my breath. But don't come and tell me war has never solved anything!

Tuesday, August 23, 2005

I strongly believe that the withdrawal from Gaza was a smart move. For an interesting discussion by prominent neocon Norman Podhoretz, see this recent article that appeared in Commentary, the journal he edited for many years to great acclaim. Not only is it good because Israel needs to disengage from the Palestinian territories (including most of the West Bank) but it also gives the Palestinian leadership a last opportunity of turning this operation into a peace process in which they are involved and sit at the negotiating table. Clearly, if terrorist attacks on Israel now increase this will not be the case and withdrawals from the West Bank will be done on a unilateral basis. In short, the Gaza withdrawal is a test case which puts the ball in the Palestinian's court. Here is an excellent analysis (via Gay and Right):

Even as Israel's anguished self-confrontation unfolds in Gaza with the army's dismantling of two dozen thriving towns and agricultural villages, Palestinian leaders are demanding more. This withdrawal is only the beginning, they promise their celebrating followers. Today Gaza, tomorrow the West Bank and Jerusalem. Yet whether Israel ultimately cedes all that the Palestinians say they want will depend on the Palestinians themselves. A wary Israeli public needs to be convinced that the Palestinians want to build their own state more than they want to destroy the Jewish state. Gaza is the test case for that open question.In the coming months, a Palestine taking sovereign control of territory must begin confronting the terrorist regime that has grown in Gaza. It must wrest foreign aid away from militias and private bank accounts and put it into schools and hospitals. Its leaders must dismantle the refugee camps that have been a permanent condition of Gaza life and resettle their residents in decent housing. Finally, it must temper the culture of hatred against the Jewish people that has become routine in Gaza's schools, mosques and media.If the Palestinian leadership initiates that difficult process of physical and spiritual renewal, then the Israeli majority -- which craves peace far more than biblical borders -- will support negotiations over extending Palestinian sovereignty. And even if, as the Palestinians suspect, Ariel Sharon intends Gaza to be his first and last withdrawal, the Israeli majority will insist on substantive talks. No Israeli leader can survive politically if the electorate perceives him to be blocking a chance for peace.

Do read the whole thing. Unfortunately there are signs (via GR) that the Palestinian leadership is not stepping up to the challenge:

Hamas and Islamic Jihad announced on Monday that they have reached an agreement with the Palestinian Authority according to which the two groups would not be disarmed.The agreement was reportedly achieved during talks in Damascus between PA Prime Minister Ahmed Qurei and leaders of Hamas and Islamic Jihad.Qurei met Sunday night in Damascus with leaders of various radical groups, including Hamas and Islamic Jihad, and discussed ways of cooperating with them after implementation of the disengagement plan is completed.Sources close to the two groups said Qurei made it clear that the PA would not confiscate the weapons of any of the armed groups in the Gaza Strip.

We will have to see how things play out, but it seems to me that if Palestinian attacks continue Israel will eventually withdraw from most of the West Bank, keeping the largest settlements and all of Jerusalem, while completely sealing its borders with the Palestinian territories and leaving them in a chaotic situation where various political factions (Hamas, Fatah, Islamic Jihad etc.) clash violently, as has already started to happen. It is hard to see how this could be considered a positive outcome for the Palestinian people.

Monday, August 22, 2005

What if some students had more opportunities than others? It makes no difference. A student who does not know labor economics fails my class, even if the reason he does not know it is because he had to work two jobs to support his grandma. Should we take Olympic gold medals away from the children of parents who supported their dream from the cradle on? I think not.Maybe I deeply misread them, but I suspect that even most left-wing professors grade as meritocratically as I do. They may give extra help to students who come to office hours, but if a student spends 2 hours in your office every week and still fails the exam, you can't let him slide.To me, this reveals a basic inconsistency in egalitarian philosophy. If you assign grades based on merit, and merit depends on performance unadjusted for opportunity, then why shouldn't the same principle hold for income and wealth? Just because you feel sorry for someone, why does that entitle them to a share of the riches of the more successful? And if you do not adjust for unequal opportunities when you grade, why should you adjust for unequal opportunities when you contemplate redistribution?

Though I hate the stress of taking exams, I cannot but agree. Megan McArdle adds:

I find it odd, too, that so many academics profess to be egalitarians, yet academia as a whole has produced one of the most radically inegalitarian societies to be seen since Louis XVI fled Versailles. Many academics of my acquaintance profess to be aghast at the "status seeking" in which their neighbours engage--and yet I have never met anyone as obsessed with collecting professional merit badges as an academic. Nor have I experienced any other organisational culture, even in hyper-competitive consulting or investment banking, in which professional success is so readily confused with personal worth.Since all the happiness research currently captivating left-wing intellectuals purports to illustrate that it is one's place on the relative rank-order, rather than the absolute amount of income one earns, that makes people happy, why hasn't academia moved to obscure the status-markers which make the life of a low-ranked academic so much less happy than it could be?In other words, as I have always longed to ask John Kenneth Galbraith, "if you think that we should equalise the distribution of income, why do you not think that we should equalise the distribution of PhDs?"

I find these arguments very compelling. Most Europeans would say this is typical American cruelty - over the top, Anglo-Saxon market capitalism (horror of horrors). Most Europeans live under the absurd illusion that state-funded health care is free (where do you think the money comes from?) and are convinced beyond any reasonable argument and evidence that there are no welfare and social programs in the United States. Funnily enough it is precisely in the vaunted European "social-economies" that people are worse off:

But what about equality? Well, the percentage of Americans living below the poverty line has dropped to 12% from 22% since 1959. In 1999, 25% of American households were considered "low income," meaning they had an annual income of less than $25,000. If Sweden--the very model of a modern welfare state--were judged by the same standard, about 40% of its households would be considered low-income.

Sunday, August 21, 2005

This (via Drudge) seems to be a good message to send to the terrorists who are trying to derail the democratic progress in Iraq.

The Army is planning for the possibility of keeping the current number of soldiers in Iraq _ well over 100,000 _ for four more years, the Army's top general said Saturday.In an Associated Press interview, Gen. Peter Schoomaker said the Army is prepared for the "worst case" in terms of the required level of troops in Iraq. He said the number could be adjusted lower if called for by slowing the force rotation or by shortening tours for soldiers.

For anybody who cares about the fate of Iraq, this column is absolutely essential reading. It really gives a breathtaking view of all the positive things that are happening and that people in America and Europe are simply not told about.

This interesting anecdote left me with mixed feelings, both because of the events it describes and because of the way they are recounted and contextualized. As an observant Jew, and a classical-liberal minded person, I feel strong solidarity towards a Jew who wants to wear his yarmulka in public and expects not to be attacked for it. Additionally I have no doubt that France (and the rest of Europe) has a problem with Islamist extremisim and knee-jerk, uninformed anti-Americanism. Anti-Semitism in Europe has undoubtedly been on the rise, both in terms of outright attacks, and in terms of political opinions related to Israel and its policies (and I am not referring to criticism, but to outright hostility, which other countries - that objectively do much worse things than Israel has ever been accused of - are spared).To underline this, I can confirm that I do not feel comfortable walking down the street with my yarmulka on (and I don't), and I think twice before telling someone I am Jewish. This was never a problem during the five years I lived in the United States.On the other hand I must say that I found the author's attitude unwise: independently of the Jewish aspect of the incident, I think it is not a good idea to react forcefully when one is attacked, because it is dangerous. If I was mugged I would probably submit without putting up a fight at all. In this case, where the issue is not some belonging, I can understand the impulse of being more intransigent, nonetheless I feel the situation is less dire, and the French deserve less contempt, than the author makes out.For one thing, anecdotal evidence is always very shaky. I remember that while I lived in the States there was a shooting incident in Chicago, in which Jews were targeted (I think it is the shooting referred to in this story). Nonetheless, nobody would use this as evidence that there was widespread anti-Semitism in Chicago. On the other hand I have lived in Europe most of my life and I have never been the subject of outright anti-Semitism, but nobody would deny the problem persists here. The one detail of the anecdote that I found really touching was this:

Batya and I caught our breath and sat down to wait for the next train. She was not sure what had transpired, but she was very afraid for me. After I comforted her, two French high school boys approached us. They had been on the train with us and had disembarked with us. After huddling for a few moments, one of them in broken English shyly apologized for the incident. Speaking for his friend and himself (and all of France, he believed), the boy tried to assure me the attacker was not representative of all Frenchmen. Seeing that they were more embarrassed and shaken than I was, it did not seem the time to challenge his “not representative” assertion by citing the general French population’s enthusiastic participation in such hijinks as the Dreyfus Affair, French Nazi collaboration, and the current French politicians' drive to appease their Arabs with unceasing pro-Palestinian claptrap and policies. Instead, I graciously nodded and told them I appreciated their sentiments.

No doubt, it is easy to scoff at this as the author does, but I feel incredible respect for this teenager, who apologises, in a language he does not speak well, for an attack he was in no way involved in. I honestly do not know if I would have had the character to do such a thing if I was in his shoes. Additionally it should be noted that I do think the boy was (at least mostly) right in saying that the attacker was not representative of French people in general.I am really not sure exactly what to think, and I have no idea of where European public opinion will go in the next few decades. However I do feel that, while the situation is serious, it is not as desperate as the author makes out.Here is an interesting discussion of the subject. Ironically, I agree with a former member of Joerg Haider's party:

It is not that Europe has become more anti-Semitic, it is simply that, over the past few years, people have felt much more at ease in expressing their prejudices.

For the moment I am still optimistic that there will be a gradual improvement, particularly with the slow development of this process. I could be wrong, but my everyday interactions still don't bear out the attitude of the author of the above-mentioned anecdote. At the same time it is essential to keep one's eyes wide open.

Saturday, August 20, 2005

Two climate change sceptics, who believe the dangers of global warming are overstated, have put their money where their mouth is and bet $10,000 that the planet will cool over the next decade.The Russian solar physicists Galina Mashnich and Vladimir Bashkirtsev have agreed the wager with a British climate expert, James Annan.The pair, based in Irkutsk, at the Institute of Solar-Terrestrial Physics, believe that global temperatures are driven more by changes in the sun's activity than by the emission of greenhouse gases. They say the Earth warms and cools in response to changes in the number and size of sunspots. Most mainstream scientists dismiss the idea, but as the sun is expected to enter a less active phase over the next few decades the Russian duo are confident they will see a drop in global temperatures.

I guess only time will tell. I should note that even if these Russian scientists are wrong, ie. global temperatures do go up, that does not mean the change is caused by human activity, and even if it was caused by human activity, the Kyoto Protocol clearly is totally useless in addressing the human contribution to the problem.

Thursday, August 18, 2005

Good news: surprisingly, pressure on Fazio to resign does not seem to be easing.

The president of Italy's powerful business lobby said Wednesday that the embattled governor of the Bank of Italy should resign following revelations of his involvement in a bank takeover bid under investigation by prosecutors.

Luca Cordero di Montezemolo, the president of Confindustria, made the remarks during an evening public conference in this mountain resort in Italy's Dolomites.

"Yes, I think Antonio Fazio should have resigned, because when you undermine so strongly the credibility and impartiality of the system, you can't not take that into account," Montezemolo said.

Additionally, according to a recent poll, 81% of business leaders in Italy also think he should go. I am skeptical of any positive result, but maybe there is room for hope.

There are, in fact, some principles involved here. Any citizen has the right to petition the president for redress of grievance, or for that matter to insult him to his face. But the potential number of such people is very large, and you don't have the right to cut in line by having so much free time that you can set up camp near his drive. Then there is the question of civilian control over the military, which is an authority that one could indeed say should be absolute. The military and its relatives have no extra claim on the chief executive's ear. Indeed, it might be said that they have less claim than the rest of us, since they have voluntarily sworn an oath to obey and carry out orders. Most presidents in time of war have made an exception in the case of the bereaved—Lincoln's letter to the mother of two dead Union soldiers (at the time, it was thought that she had lost five sons) is a famous instance—but the job there is one of comfort and reassurance, and this has already been discharged in the Sheehan case. If that stricken mother had been given an audience and had risen up to say that Lincoln had broken his past election pledges and sought a wider and more violent war with the Confederacy, his aides would have been quite right to show her the door and to tell her that she was out of order.Finally, I think one must deny to anyone the right to ventriloquize the dead. Casey Sheehan joined up as a responsible adult volunteer. Are we so sure that he would have wanted to see his mother acquiring "a knack for P.R." and announcing that he was killed in a war for a Jewish cabal? (a claim that has brought David Duke flying to Ms. Sheehan's side.) This is just as objectionable, on logical as well as moral grounds, as the old pro-war argument that the dead "must not have died in vain." I distrust anyone who claims to speak for the fallen, and I distrust even more the hysterical noncombatants who exploit the grief of those who have to bury them.

Do read the whole thing, and also see this interesting editorial in the Wall Street Journal. The truth is, I really feel bad for her because she lost her son, and because I think she is being exploited by the anti-war left (and extreme right). At the same time, her son enlisted as a rational adult, conscious of the dangers he was going to encounter and I don't see why her political opinions should have any more validity than anybody else's. In the end the person I really feel bad for, and have endless admiration for, is her son, who lost his life in an honourable and worthy cause (the last two links are absolute must reads).

Wednesday, August 17, 2005

An Israeli Jew killed three people and wounded three others Wednesday afternoon when he opened fire on a group of Palestinians in the industrial area of the West Bank settlement of Shiloh. The police said that the Asher Weisgan, a 38-year-old driver from Shvut Rahel in the West Bank had asked a security guard in the industrial area for a cup of water. He then stole the guard's weapon, shot the two Palestinian workers in his car at the time, and then ran into the industrial area, killing another worker on the way and wounding two others.Israeli security forces managed to restrain him and took him to Binyamin police station for questioning.

I am, of course, appalled. There doesn't seem to be enough information to get a clear idea of what happened yet, but it will be interesting to see how he will be treated by the authorities. Given the heartening reaction of Jews all over the world to the previous Jewish terrorist attack, just three weeks ago, I am confident that he will be punished most severely.

While it is "only" the third terrorist attack perpetrated by Jews since World War II that I can think of (off the top of my head), I am still quite worried by these incidents. I confidently hope that a strong reaction on all our parts can beat back this cancer of violent extremism.

Tuesday, August 16, 2005

It is literally an article of faith among even the most well-informed people that it is a proven fact that Saddam Hussein had no links to terrorism. In fact the opposite is true. Here is an interesting website based on a Hoover Institution presentation from last year (via RJC). Go through it, it has plenty of source material and links, and note this comprehensive chart:

Well, if he wasn't involved in terrorism, I'd hate to see what the real terrorists are up to.

Monday, August 15, 2005

The German Chancellor, Gerhard Schroeder, who barely won his last election in 2002 by fuelling and riding a wave of anti-Americanism in the face of the war in Iraq is at it again. There really is no nice way to put this: either Schroeder is an opportunist or an idiot, and I daresay he is both. The only way that diplomatic negotiations with Iran can hope to reach a marginally successful outcome is if they are backed up with credible threats and Schroeder has managed to communicate quite clearly that these will not be forthcoming, therefore dooming the whole process. I didn't realize he preferred the Israeli solution.I think Schroeder is the worse leader any European country has had in recent times and it is for this reason that I dread what is the talk of the moment - a grand coalition in which Schroeder's SPD would become the junior partner of Angela Merkel's CDU. Schroeder's economic policy has been a disaster and he runs one of the most revolting foreign policies of any Western nation: vigorous opposition to anything America does, strong support and solidarity for Putin and China, including support for raising the Chinese arms embargo (while China explicitly threatens Taiwan, an independent democracy, with invasion and still glorifies a leader that killed an estimated 70 million of its people). All this with the cooperation of the German media, that evidetly have no interest in representing the world in a fair and realistic light. The earlier Schroeder is gotten rid of the better, so I'll cling to the hope that the German people award the CDU-FDP coalition a majority.

Friday, August 12, 2005

Harry's Place has some impressive investigative reporting on the Guardian and its antics. It seems that it has really been outdoing itself lately: they have published a column by a man linked to Al Qaeda, without mentioning this to its readers.

Last January, the Guardian published an edited version of a speech attributed to Osama Bin Laden in the form of an opinion piece in its Comments section. This article was the source of some hilarity, as wits started to describe Osama Bin Laden as a "Guardian columnist".Slightly less amusing was last month's "Aslam Affair", in which the Guardian published a series of articles by an activist in Hizb'ut Tahrir, a racist theocratic totalitarian political party. There were really two aspects to the Aslam Affair. The first was that Aslam's articles were in effect propaganda pieces for Hizb'ut Tahrir, but that the Guardian had not disclosed to their readership, Aslam's political activism. The second was that the Guardian clearly had little understanding of the nature of Hizb'ut Tahrir's politics.Today's Comment piece by Sa’ad al-Fagih [sic] is, I think, a somewhat more worrying example of the Guardian's naivity in the field of extremist Islamist politics. The essence of the article is that the United Kingdom government needs to change its policies as it is playing into the hands of al-Qaida.What concerns me is this. Sa’ad al-Faqih [is] described in the footnote to the article as “a leading exiled Saudi dissident and director of the Movement for Islamic Reform in Arabia”.In fact Sa’ad al-Faqih is a little bit more than that.

Read the whole thing. While my views are diametrically opposed to those often expressed in the Guardian, I am confident that most of their journalists and readers are in good faith, and will presumably not be happy about this. It is certainly possible that this was an oversight, but if the editors don't know these things then they shouldn't be editing a newspaper. As a commenter at Harry' Place says: "Has anyone at the Guardian heard of that new-fangled Google thingy?"

Every time I read about the environment I am appalled by how dramatically Europeans seem to have their priorities mixed up. Not that I go around asking, but I would be very surprised to find anybody among my acquaintances who is not in favor of the saintly Kyoto Protocol. On the contrary, even mildly criticising it often gets me some heated (and totally uninformed) reactions. The whole idea of Kyoto is an insult to human intelligence. Even if you want to subscribe to the current orthodoxy that global warming is the most dramatic threat that the world faces today, which I do not, the corrective effects of Kyoto are simply laughable and the costs staggering. In reality, however, Kyoto is not only stupid, but actually a criminal waste of resources that should be employed to solve actually existing problems. Here is a magisterial article making the case.

Nearly a third of the world's population does not have safe drinking water. Families get water from distant wells, rivers and lakes that often teem with bacteria and pollutants. As Danish environmentalist Bjorn Lomborg points out, for the cost of implementing the Kyoto climate change treaty for just one year (a cost estimated at $150 billion), we could permanently provide sanitation and clean, safe drinking water to everyone on the planet.

Do read the whole thing. It simply boggles the mind that we are spending all this money in a misguided effort to limit carbon dioxide, which is fundamental to the functioning of the planet and does not have any direct harmful effect on human beings, while ignoring real pollutants and (to say the least) much more pressing environmental problems, mostly in developing countries.Additionally, while I don't doubt that there are environmental problems in the West too, why is it that so few people are aware of the fact that the environment in developed economies has been dramatically improving (and steadily continues to do so)?Presumably, the reason is that the media bombards us with stories about impending doom by frying. Just yesterday I saw Drudge link this story on a WWF report saying that European cities are heating up. I am just being facetious, but considering that the other day I had to wear a sweater, coat and wool scarf to take an evening stroll with friends in Brussels (at the beginning of August, mind), I'd say bring it on!

Thursday, August 11, 2005

As an Italian I would like to confirm that Italy is not only the sick man of Europe - it is also a sick joke. There are criminals who are successfully destroying what little is left of the illusion that Italy is a serious Western nation with a developed economy and all Berlusconi worries about is passing laws that would make sure that catching them red handed, as happened this time, will not be possible in the future.

Opposition politicians, and even some pro-government legislators, yesterday expressed growing concern about a proposal by Silvio Berlusconi, Italy's prime minister, to restrict the use of wiretapping in judicial inquiries.Mr Berlusconi said last weekend that he wanted to limit the practice to investigations into terrorism and the mafia, and to punish those who leak or publish recorded telephone conversations with five to 10 years in prison.Roberto Calderoli and Roberto Maroni, two leaders of the populist Northern League that is a junior partner of the government coalition, yesterday said it would be too restrictive to limit wiretapping to Mafia and terrorism investigations.Had these proposals already been law, inquiries into suspected wrongdoing over an Italian bank takeover battle that has embroiled Antonio Fazio, the Bank of Italy governor, would have been curtailed.

While I am certainly no fan of the Italian left, it is undeniable that Berlusconi has been an utter disaster (see here). However, notwithstanding his best efforts to make a total mess of the Bank of Italy kerfuffle, I do believe that ultimately some positive outcome will emerge.

I find it hard to believe that after all the revelations on the actions of the governor of the central bank, Antonio Fazio, and of Banca Popolare Italiana and friends, Consob and the Bank of Italy will rescind its suspension of BPI's tender offer for Banca Antonveneta, and it seems to me likely that BPI itself will not want to go through with the bid anyway, possibly reaching an agreement with ABN Amro to sell its stake to the Dutch bank. That would be great, finally opening the Italian retail banking sector to foreign competitors. I may be wrong, of course. Never underestimate our ability to mess things up...

When Sir Iqbal Sacranie, head of the Muslim Council of Britain, admitted that “our own children” had perpetrated the July 7 London bombings, it was the first time in my memory that a British Muslim had accepted his community’s responsibility for outrages committed by its members.

Instead of blaming US foreign policy or “Islamophobia”, Sacranie described the bombings as a “profound challenge” for the Muslim community. However, this is the same Sacranie who, in 1989, said that “Death is perhaps too easy” for the author of The Satanic Verses. Tony Blair’s decision to knight him and treat him as the acceptable face of “moderate”, “traditional” Islam is either a sign of his Government’s penchant for religious appeasement or a demonstration of how limited Mr Blair’s options really are.

Sacranie is a strong advocate of Mr Blair’s much-criticised new religious hatred Bill that will make it harder to criticise religion, and actually expects the new law to outlaw references to Islamic terrorism. He said as recently as January 13: “There is no such thing as an Islamic terrorist. This is deeply offensive. Saying Muslims are terrorists would be covered [ie, banned] by this provision.” Two weeks later his organisation boycotted a Holocaust remembrance ceremony in London, commemorating the liberation of Auschwitz 60 years ago. If Sir Iqbal Sacranie is the best Mr Blair can offer in the way of a good Muslim, we have a problem.

[...]

The deeper alienations that lead to terrorism may have their roots in these young men’s objections to events in Iraq or elsewhere, but the closed communities of some traditional Western Muslims are places in which young men’s alienations can easily deepen. What is needed is a move beyond tradition — nothing less than a reform movement to bring the core concepts of Islam into the modern age, a Muslim Reformation to combat not only the jihadi ideologues but also the dusty, stifling seminaries of the traditionalists, throwing open the windows of the closed communities to let in much-needed fresh air.

Do read the whole thing. By the way, I couldn't help noticing that for the second time in as many days the Times has published columns that previously appeared elsewhere, without informing its readers. Peculiar.

At any rate, here is a another interesting article that makes some interesting observations on religion and terrorism.

Wednesday, August 10, 2005

Christopher Hitchens has an excellent column in Slate in which he excoriates the left for ignoring the plight of Iraqis after three decades of brutal dictatorship and the current terrorist insurgency.

How can so many people watch this as if they were spectators, handicapping and rating the successes and failures from some imagined position of neutrality? Do they suppose that a defeat in Iraq would be a defeat only for the Bush administration? The United States is awash in human rights groups, feminist organizations, ecological foundations, and committees for the rights of minorities. How come there is not a huge voluntary effort to help and to publicize the efforts to find the hundreds of thousands of "missing" Iraqis, to support Iraqi women's battle against fundamentalists, to assist in the recuperation of the marsh Arab wetlands, and to underwrite the struggle of the Kurds, the largest stateless people in the Middle East? Is Abu Ghraib really the only subject that interests our humanitarians?

Instead of defending liberal values and acting as an attractive centre of power on the same playing field as the true great powers, the US and China, it does nothing. On the contrary, we Europeans present ourselves, in contrast to the supposedly arrogant Americans, as world champions of tolerance, which even Otto Schily, the German interior minister, justifiably criticises. Where does this self-satisfied reaction come from? Does it arise because we are so moral? I fear it stems from the fact that we Europeans are devoid of a moral compass.For his policy of confronting Islamic terrorism head on, Bush risks the fall of the dollar, huge amounts of additional national debt and a massive and persistent burden on the US economy. But he does this because, unlike most of Europe, he realises what is at stake is literally everything that really matters to free people.While we criticise the capitalistic robber barons of the US because they seem too sure of their priorities, we timidly defend our welfare states. “Stay out of it. It could get expensive,” we cry.So instead of acting to defend our civilisation, we prefer to discuss reducing our 35-hour work week, improving our dental coverage or extending our four weeks of annual paid holiday. Or perhaps we listen to television pastors preaching about the need to reach out to terrorists, to understand and forgive. These days, Europe reminds me of an old woman who, with shaking hands, frantically hides her last pieces of jewellery when she notices a robber breaking into a neighbour’s house. Appeasement? That is just the start of it. Europe, thy name is cowardice.

The author is the CEO of Axel Springer AG, a large German publisher which owns Die Welt and Bild (Europe's largest circulation newspaper), and has just acquired ProSiebenSat.1, a television station. Considering the utter garbage that even high-brow German newspapers and magazines publish it is heartening to see that at least some people still have their head screwed on right (also see this excellent article).

Tuesday, August 09, 2005

As prosecutors continue their inquiries in the Banca Antonveneta affair, the Financial Times has an interesting analysis comparing the present turmoil to the Calvi case.

As details emerge of how Antonio Fazio, governor of the Bank of Italy, sought to favour Banca Popolare Italiana, a small Italian bank, over Dutch lender ABN Amro in the takeover battle for Antonveneta, one past scandal comes readily to mind: the Banco Ambrosiano affair. This culminated with the body of Roberto Calvi, Ambrosiano's chairman, hanging from Blackfriars Bridge in London in 1982.“The only thing missing so far is a corpse,” says one Milanese banker.Among the similarities are an attempted takeover of the company that owns Corriere della Sera, Italy's most influential newspaper and a tough critic of the Bank of Italy's role in the affair; secret alliances among bankers, financiers and real estate moguls; links with the Vatican; mysterious off-shore bank accounts; and, of course, political scheming.

It is incredible that such a thing even needs to be discussed. Fazio's shameless refusal to resign, after having done irreparable damage to the reputation of the Bank of Italy and to the Italian economy as a whole, coupled with the government's wishy-washiness simply boggles the mind. I can only conclude that the Italian establishment is so insular that it does not realize the extent to which this scandal is seen by foreigners as further evidence that Italy simply cannot be taken seriously. And, frankly, I would be hard pressed to come up with a counter-argument to that conclusion. See here and here for background.

I think that, in a similar way, most liberals and even some leftists like to believe that the world is a just and sane place, and that people are rational actors--particularly people in third-world countries (the actions of the "evil" US and Israel are often excluded from this benign formulation). If such people are out to get us, it's merely because we have done something to them that has made us deserve it. The reasoning is similar to that of the aforementioned abused child.

[...]

Anyone could be a target at any time. But if we say that they are only reacting to things that we ourselves are doing, things we could easily change if we wanted to, then the locus of control goes back to us, and the world is a far less scary and far more ordered place.

And it is precisely because this is an illusion that it makes this mental exercise so dangerous. Ironically, it would make the world a much less scary and more ordered place, if people recognized the fact that the world is more scary and less ordered than they want to believe (and as a result were willing to give blame where blame is due).

Monday, August 08, 2005

Well, thank God the UN sanctions against the regime of Saddam Hussein were so effective: they really should have been given more time to work. Oh, wait...

Benon Sevan, former head of the United Nations' Iraqi oil-for-food programme, took almost $150,000 in illicit oil-related cash payments in concert with two Egyptian businessmen, the UN's independent inquiry alleged on Monday.The findings came a day after Mr Sevan resigned, insisting it was not credible he would have compromised his career for such a sum.

Claudia Rosett, who has been assiduously following the story for over a year, has a characteristically prescient comments here:

It's rich that the former head of the United Nations Oil-for-Food program, Benon Sevan, is now protesting the secrecy surrounding U.N. records that he himself set up as confidential.[...]Sevan's recent experience of scrolling one page at a time through highly limited sets of U.N. documents, trying to piece together shreds and scraps of information, is an excellent description of what it was like during the Oil-for-Food era for anyone outside the U.N. seeking to know who was doing U.N.-approved business with Saddam — and on what terms. The United Nations did not disclose the names of the contractors, the price, quantity, or quality of goods. The U.N. provided no public accounting for the billions in bank balances, the interest collected, the letters of credit amended or even the $1.4 billion cut of Saddam's oil sales collected by Annan's secretariat to run the program (from which the Volcker inquiry is now drawing its $34 million budget, for which there has also been no public accounting).

Sunday, August 07, 2005

I was perusing this fascinating photo-essay about Chernobyl when I chanced on an interesting (and unsettling) fact that the author mentions. Apparently less than 10% of the radioactive fuel in the Chernobyl plant has actually escaped, and the rest is now being held in place by an increasingly unstable sarcophagus. Wikipedia confirms this:

The sarcophagus is not an effective permanent enclosure for the destroyed reactor. Its hasty construction, in many cases conducted remotely with industrial robots, means it is aging badly, and if it collapses, another cloud of radioactive dust could be released. The sarcophagus is so badly damaged that a small earth tremor or severe winds could cause the roof to collapse. A number of plans have been discussed for building a more permanent enclosure. Most of the money donated by foreign countries and contributed by Ukraine has been squandered by inefficient distribution of construction contracts and overall management, or simply stolen.About 95% of the fuel (about 180 tonnes) in the reactor at the time of the accident remains inside the shelter, with a total radioactivity of nearly 18 million curies. The radioactive material consists of core fragments, dust, and lava-like "fuel-containing materials" (FCM) that flowed through the wrecked reactor building before hardening into a ceramic form. By conservative estimates, there is at least four tons of radioactive dust inside the shelter.Water continues to leak into the shelter, spreading radioactive materials throughout the wrecked reactor building and into the surrounding groundwater. The high humidity inside the shelter continues to erode the concrete and steel of the sarcophagus.

I guess this is one more thing we need to worry about. Considering the disastrous effect of just a tiny portion of the fuel, I find it hard to imagine what would happen if the sarcophagus was breached (and I haven't seen any informed speculation on this). It really puts our other everyday concerns in perspective... for a while at least.

Thursday, August 04, 2005

An appalling terrorist attack has been perpetrated by a Jewish extremist from one of the West Bank settlements.

In what police are calling an incident of Jewish terrorism, a Jewish man dressed in IDF uniform opened fire on a bus in the northern town of Shfaram Thursday evening, killing at least 4 people and wounding nearly a dozen more.The shooter, Natan Eden Zadah, 19, was also killed when he was assaulted by a mob of furious bystanders and witnesses. A crowd of thousands gathered around the site of the attack and surrounded the bus, where the attacker's body still lay until police removed it nearly five hours after the incident.

As a rational human being and particularly since I am a religious Jew (even though in all fairness this incident has no connection to me) I feel compelled to explicitly condemn this horrific act of terrorism and murder.

Prime Minister Ariel Sharon issued a statement calling the attack "a criminal act of a bloodthirsty terrorist targeting innocent Israeli civilians." He said that he instructed security officials to make the investigation of the incident a top priority."This terrorist incident is a purposeful attempt to harm relations between Israeli citizens," Sharon said. "Terror of one citizen against others is the greatest danger to the future of Israel as a democracy. All of Israel, without regard to religion, race, or gender condemns this attack. The Israeli government is determined to defend its citizens of every sector."

Apparently the attack was motivated by the Gaza pull-out. I express my support for the pull-out here. I still think it is an excellent idea and that it should be a prelude to a pull-out from most of the West Bank. I have no doubt that the Israeli public is appalled by this attack and I am convinced that it won't impede the Gaza operation. On the contrary, I suspect it will make it easier, because it will destroy some of the political good-will that the settlers had gathered in recent times.

Wednesday, August 03, 2005

A serious problem in the Israeli-Palestinian conflict is the undeniable fact that for many Palestinians the goal is not to coexist with Israel in an adjacent peaceful Palestinian state, but to destroy Israel and to push its Jewish population into the Mediterranean.

More than 51% see the liberation of all historic Palestine - and the removal of Israel from the map - as the true goal of the intifada, according to JMCC's findings.

(Though it should be noted that the poll dates from 2002 and other trends seem to have improved significantly since then, so, hopefully, this idea may not be as widespread anymore as this poll suggests.)Notwithstanding the (at best) naive statements of Mahmoud Abbas and the recent blathering of Condoleezza Rice, the Palestinian Authority is not only failing to even attempt the disarmament of terrorists, but it is actively ensuring that its population is misinformed and indoctrinated with the most vile myths about Jews, Israelis and their history. Nothing indicates this more clearly than the textbooks that are used in the schools run by the PA. Europeans seem to be (at best) unaware of this clear lack of even good intentions on the PA's part and it is no wonder: while in no way comparable to the outright propaganda and censure practiced by the Palestinian Authority, Europeans too are in thrall to a media culture rife with bias and distortion, as can be seen from the behaviour of even the most prestigious organizations.

And here too the perceptions of children (via No Pasaran) indicate what biases trickle down from our media and society:

In January, a cartoon festival was held in the town of Carquefou, just outside of Nantes in the northwest corner of France. Students of all ages competed in a contest to illustrate their vision of the United States. They drew obese Americans devouring Coca-Cola and McDonald's hamburgers. They drew the Statue of Liberty with fangs or in chains or being run over by a wicked Uncle Sam on a motorcycle. And they drew George W. Bush: Bush riding a tank to war; Bush taking over the world; Bush as a liar; Bush as a monster.

There were a few lighthearted drawings of Hollywood and Las Vegas and fast food (hamburgers, always hamburgers) but, predominantly, from ages 8 to 18, the French students sketched images of a fierce and fearsome country. One cartoon summed up American villainy with a series of three hands. The first was a fist representing Stalin's Russia. The second was a saluting palm, representing Hitler's Germany. The third was another fist clutching a cross, representing Bush's America.Stalin, Hitler and Bush -- one French student's axis of evil.

In the face of such things I am at a loss for words. My hope is that freedom of expression coupled with the advent of the internet, globalization and bloggers will lubricate the market of ideas in Europe, and eventually the PA, rooting out the fiction and bringing some sanity. Evidently differences will remain, as they should. What is scary and frustrating is that many conceptions people hold here are based on pure fantasy.

Monday, August 01, 2005

I work in the field of corporate governance (as defined here; also see here), so I often deal with the relationship between shareholders and directors/managers. I strongly believe that in many instances corporate governance needs to be improved (in the interests of shareholders) and it irks me that corporate governance is often conflated with corporate social responsibility, as I agree with this magisterial survey that the Economist ran a few months ago.

The one thing that all the nostrums of CSR have in common is that they are based on a faulty—and dangerously faulty—analysis of the capitalist system they are intended to redeem. Admittedly, CSR is now so well entrenched and amply funded that to complain about it may be pointless. We are concerned that it may even be a socially irresponsible use of scarce newsprint. Nonetheless, if businessmen had a clearer understanding of the CSR mindset and its defects, they would be better at their jobs and everybody else would be more prosperous.Simply put, advocates of CSR work from the premise that unadorned capitalism fails to serve the public interest. The search for profit, they argue, may be a regrettable necessity in the modern world, a sad fact of life if there is to be any private enterprise. But the problem is that the profits of private enterprise go exclusively to shareholders. What about the public good? Only if corporations recognise their obligations to society—to “stakeholders” other than the owners of the business—will that broader social interest be advanced. Often, governments can force such obligations on companies, through taxes and regulation. But that does not fully discharge the enlightened company's debt to society. For that, one requires CSR.This is wrong. The goal of a well-run company may be to make profits for its shareholders, but merely in doing that—provided it faces competition in its markets, behaves honestly and obeys the law—the company, without even trying, is doing good works. Its employees willingly work for the company in exchange for wages; the transaction makes them better off. Its customers willingly pay for the company's products; the transaction makes them better off also. All the while, for strictly selfish reasons, well-run companies will strive for friendly long-term relations with employees, suppliers and customers. There is no need for selfless sacrifice when it comes to stakeholders. It goes with the territory.Thus, the selfish pursuit of profit serves a social purpose. And this is putting it mildly. The standard of living people in the West enjoy today is due to little else but the selfish pursuit of profit. It is a point that Adam Smith emphasised in “The Wealth of Nations”: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.” This is not the fatal defect of capitalism, as CSR-advocates appear to believe; it is the very reason capitalism works.

Do read the whole thing. Also see here for some more, well-informed, CSR bashing. At any rate, this story (via Instapundit) is of particular interest to me.

Internet equipment maker Cisco Systems is fighting a shareholder action that urges the company to adopt a comprehensive human rights policy for its dealings with the Chinese government, and with other states practicing political censorship of the internet.

This poses a dilemma for me. On the one hand I completely agree that Cisco's activities in China are problematic (see Rebecca McKinnon's RConversation blog which has assiduously reported on this subject; also see this recent Anne Applebaum column in the Post). On the other hand, as noted above, I generally feel that this should be addressed by the company itself only to the extent that it affects its image (and therefore shareholder value); otherwise it should be dealt with by the government.However it seems that we are moving toward an ideal middle ground. The activists (whose ultimate goal I may not agree with) say that their immediate objective is to garner attention. If they are so successful that Cisco's image will be affected unless it shapes up it would serve the direct interests of the shareholders to change policy (notwithstanding the evident costs the company would incur as a result). This will hopefully have the positive effect of changing Cisco's behavior in the short term and also bringing the attention of Congress to this problem, which should institute long-term solutions that would apply to all market actors.

Favourite Quotes

"To my mind, this is irregular. It is un-English; it is un-American; it is French." Mark Twain: Concerning The Jews, Harper's Magazine, March 1898

"This is the sort of pedantry up with which I will not put." Winston Churchill: Pencilled in the margin of a minute issued by a civil servant who was objecting to the ending of a sentence with a preposition and the use of a dangling participle in official documents.

"To those waiting with bated breath for that favourite media catchphrase, the U-turn, I have only one thing to say: You turn if you want to. The lady's not for turning!" Margaret Thatcher: Conservative Party conference speech, Brighton, 10 October 1980

"Who was that lad they used to try to make me read at Oxford? Ship- Shop- Schopenhauer. That’s the name. A grouch of the most pronounced description." P. G. Wodehouse: Carry On, Jeeves – Clustering Round Young Bingo

"Happiness is having a large, loving, caring, close-knit family in another city." George Burns

"Never give in - never, never, never, never, in nothing great or small, large or petty, never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy." Winston Churchill: Harrow School speech, 29 October 1941

"The profits of 'protection' go altogether to a few score select persons—who, by favors of Congress, State legislatures, the banks, and other special advantages, are forming a vulgar aristocracy, full as bad as anything in the British or European castes, of blood, or the dynasties there of the past." Walt Whitman: Prose Works, III. Notes Left Over - 11. Who Gets the Plunder?

"Never in the field of human conflict was so much owed by so many to so few." Winston Churchill: House of Commons speech on August 20, 1940. (at the peak of the Battle of Britain, referring to the RAF airmen)

"And who knows? Somewhere out in this audience may even be someone who will one day follow in my footsteps, and preside over the White House as the President's spouse – and I wish him well." Barbara Bush: Wellesley College commencement address, 1 June 1990

"We shall fight on the beaches. We shall fight on the landing grounds. We shall fight in the fields, and in the streets, we shall fight in the hills. We shall never surrender!" Winston Churchill: House of Commons speech, June 4 1940 (referring to Dunkirk)

"Earnestly hope we shall not have another war with meat-coupons and no sugar and people being killed – ridiculous and unnecessary. Wonder whether Mussolini's mother spanked him too much or too little - you never know, these psychological days." Dorothy Sayers: Busman'sHoneymoon - Diaries of the Dowager Duchess of Denver

"The gunfire around us makes it hard to hear. But the human voice is different from other sounds. It can be heard over noises that bury everything else. Even when it's not shouting. Even when it's just a whisper. Even the lowest whisper can be heard over armies – when it's telling the truth." Sydney Pollack et al.: The Interpreter [2005] (Dedication from the memoirs of Edmond Zuwanie)

"An appeaser is one who feeds a crocodile – hoping it will eat him last." Winston Churchill